Portugal’s economy has rebounded and is on the verge of exiting its bailout program, bolstering the related country-specific exchange traded fund, but some warn that it may be too soon for the country to stand on its own.
The Global X FTSE Portugal 20 ETF (NYSEArca: PGAL) has gained 12.7% year-to-date.
Portugal’s 78 billion euro IMF-EU aid program is set to end on May 17, and creditors are urging the country to begin raising its own funds on the open markets without resources to credit as a safety net, reports Brigitte Hagermann for AFP.
Chancellor Angela Merkel stated that Germany will support Portugal in its decision on how to exit the bailout program, Reuters reports.
Portugal acquired the rescue package during the height of the Eurozone financial crisis to prevent a default as rising wages and state spending created massive public debt. The bailout was granted based on strict conditions, such as broad job, pay and pension cuts.
The Portuguese government has stuck to the austerity measures, which has creditors believing the country is ready to exit the program completely.
“Portugal is close to the end of the troika mission and it would be a good occasion to exit the aid programme without a safety net,” Steffen Kampeter, a top official at the German Finance Ministry said, in the AFP article.
Some economists are concerned that Portugal may still need further loans from creditors even after it exits the bailout. However, Portugal’s Prime Minister Pedro Passos Coelho has sated that the government is more concerned with how the country will exit the program and not whether they need another credit line.